The Agenda

On the Chafee Plan of 1993

You may have heard champions of President Obama’s new health law claim that it is more or less the same as the moderate Republican counteroffer to President Clinton’s health reform proposal in 1993. Ezra Klein suggested something along these lines earlier today. This is an interesting interpretation, one that has been used to suggest that Republicans have grown more “extreme” over the intervening years. Given that the Chafee proposal flawed in many important respects, I never thought much of this argument. But now I wonder if it passes muster on its own terms. Back in February, Kaiser Health News offered a side-by-side comparison of the proposals that highlights the similarities. I’d like to draw your attention to a couple of not-so-minor differences: 

(1) Medicaid Expansion. PPACA includes a dramatic expansion of Medicaid, as Sara R. Collins of the Commonwealth Fund blog observes:

In 2014, the ACA expands Medicaid eligibility for all legal residents to 133 percent of the federal poverty level (about $14,404 for a single adult or $29,327 for a family of four). This is a major change in Medicaid’s coverage of adults. Although several states have expanded eligibility to include parents of dependent children, in most states adults’ income eligibility is well below the federal poverty level. And childless adults are not currently eligible for Medicaid, regardless of their income, in most states. Because almost half of the uninsured, or 21 million people, live in households with incomes under 133 percent of poverty, the Medicaid expansion will potentially do more to increase the number of people with health insurance than any other provision in the law. [Emphasis added.]

The Chafee proposal did not include an expansion of Medicaid programs. I’d say that’s a pretty significant difference. In fact, my work is pretty much done here, but I’ll continue. 

(2) Controls High Cost Health Plans. PPACA includes “taxes on plans over $8,500 for single coverage to $23,000 for family plan.” The Chafee proposal went a different and, I imagine, more effective route: “caps tax exemption for employer-sponsored plans.” As we all remember, organized labor had something to do with this crucial difference, as did campaign demagoguery directed against Sen. John McCain’s health proposal in 2008.

(3) Prohibits Insurers From Setting Lifetime Spending Caps. PPACA bans lifetime spending caps, the Chafee plan did not. 

(4) Equalize Tax Treatment For Insurance Of Self-Employed. The Chafee plan did it, PPACA does not.

(5) Extends Coverage To Dependents. PPACA expands coverage for “children” up to the age of 26, the Chafee plan did not.

On one point, there is a slight tension between KHN’s account and an account by Paul Starr. 

And does the Chafee plan suggest that the Republican party has moved far to the right over the last decade plus? There’s no denying that there’s been some of this. But of course the Chafee plan lost support among Republicans in 1993 as its potential cost became clearer, as Paul Starr of Princeton noted in an excellent, comprehensive article on “What Happened to Heath Care Reform?” that appeared in The American Prospect in 1994. Having learned their lesson once, it’s hardly surprising that Republicans would start from their 1994 position rather than their 1992 position.

Starr sheds light on the substantive failures of the centrist proposals of 1993:

 

The failure of congressional compromise also stemmed, however, from the weaknesses of the centrist proposals. While rejecting an employer mandate, the Cooper and Chafee plans included no other source of revenue capable of financing the broadened coverage each called for. The Cooper plan covered up its inadequate financing by forcing health plans to eat losses from unfunded subsidies for the poor. The Chafee plan had nowhere near enough revenue to pay for the subsidies it envisioned for households with incomes up to 240 percent of the poverty level. These inadequacies were typical of recent moderate and conservative proposals. The reform plan that President Bush presented in February 1992, for example, included no financing provisions at all. Dole backed out of the Chafee bill and later out of the bill he cosponsored with Packwood when he saw the fiscal difficulties they posed.

KHN’s chart states that that the Chafee plan did have an employer mandate, but with no requirement to contribute to premium cost. I imagine there were iterations of the proposal.

The financing provisions in the Chafee and Cooper plans also raised other objections. Studies showed that Chafee’s individual mandate and subsidies would sharply increase costs for middle-class households; both the Chafee and Cooper plans created strong incentives against work. If the president had embraced either proposal, the spotlight would have fallen on these problems. [Emphasis added.]

Interestingly, similar criticisms have been levied against the inadequacy of PPACA’s funding mechanisms and the marked increase in effective marginal tax rates that its schedule of premium subsidies entails. 

Starr also anticipated problems that future reform efforts would face. He approaches the issue from a perspective that is decidedly skeptical of catastrophic health insurance plans and other market-oriented ideas. Yet it’s useful to read an account from someone who saw the extent to which the Chafee proposal divided congressional Republicans, and who can shed light on its profound flaws and limitations.

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